Can Economic Time Series Be Differenced to Stationarity?

Stephen Leybourne (), Brendan McCabe and Andrew Tremayne

Journal of Business & Economic Statistics, 1996, vol. 14, issue 4, 435-46

Abstract: This paper considers a class of nonstationary varying coefficient autoregressive models which allow stochastic variability in the autoregressive root. It is argued that such models provide a better description of the behaviour of macroeconomic variables than fixed unit root autoregressive models as they allow more general forms of nonstationarity. We construct a test of the null hypothesis of a fixed unit root against the alternative of a fixed unit root against the alternative of a randomized root with unit mean, and derive its asymptotic distribution. The test is applied to a number of U.S. macroeconomic series generally considered to contain fixed unit roots. We find that for about half of the series the fixed unit root null is rejected.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:14:y:1996:i:4:p:435-46

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